It cost pounds 4.6bn to stop Swiss 'going Soviet'

Once upon a time there was a country so strong it held the world in its thrall. When the victorious powers of the greatest war ever fought cast an envious eye on this country's illicit wealth, they were sent packing.

Thus begins the tale of Switzerland, anno 1946, as told by the governments of Britain and the United States today. The Allies knew - and after 50 years have rediscovered this knowledge - that the Swiss had made a metaphorical bomb out of the Second World War, and were hoarding plundered Nazi treasures in the vault of the National Bank. The Allies could never prove it, of course, so the plucky Swiss were able to keep most of the loot, thanks to their prodigious diplomatic skills. The West, we are told, had little alternative but to settle for peanuts.

The Foreign Secretary, Malcolm Rifkind, is flying to Switzerland this week in a belated attempt to get a rebate. Belgium and the Netherlands, two of Britain's allies ripped off in the deal struck in Washington in 1946, are also looking for a windfall, and Jewish groups are threatening to sue once again.

Mr Rifkind might well be surprised by the Swiss version of events, because however unpalatable it may sound, the Western climbdown which allowed Switzerland to keep most of the Nazi gold owed little to a triumph of Swiss will, but a great deal to realpolitik, driven by the West's paranoia about Communist expansion. Britain and the US, worried about pushing Switzerland into the clutches of Russia, were desperate to keep the Swiss on side at any cost. The bill adds up to about pounds 4.6bn at today's prices.

Switzerland and the Allies had haggled over the great carve-up for more than a year. At the outset of the talks, the four powers held a common goal in their sights. The spoils of war were to be shared equally. Henry Morgenthau, the US Treasury Secretary, had drawn up a plan for the "pastoralisation" of Germany, stripping Europe's greatest industrial power of its industry.

By early 1946 the honeymoon was over. The Russians were taking more than their share, tightening their grip over eastern Europe and spreading their creed to countries that by rights should have been beyond their reach. Switzerland, one of the pillars of global capitalism, was meanwhile trading happily with the new enemy, buying large quantities of Siberian gold to feed the Soviet economy's hunger for hard currency.

The West panicked. As the Cold War began to grip the continent, the Morgenthau plan was shelved in May 1946, German reparations were suspended and the rebuilding of the German economy began in the western zones of occupation, while the Russians continued to dismantle the east. Germany was to become a Western economic power with the aid of the Marshall Plan, and eventually a military force, too: Nato's first line of defence against the creeping Communist amoeba. Also in May 1946, Britain, France and the US abruptly settled with Switzerland.

"The Allies knew that the Swiss wanted to keep the money," says Gian Trepp, the Swiss author of a book exposing links between the banks and the Nazis. "In France and Italy you had a strong Communist party. The Allies did not want to alienate Switzerland." Ridiculous as it may sound now, the West worried that the country that reluctantly gave a home to Lenin until 1917 was in danger of being seduced by Communist Russia. But a Communist takeover was only narrowly averted in neighbouring Austria, and the threat to Switzerland was taken seriously then. The descendants of Holocaust survivors who have searched in vain for 50 years for family property are not amused. "What happened in 1946 is a disgrace," says Ignatz Bubis, the head of Germany's Jewish community. "I would describe it as the 'second plunder'."

The gold in the vaults of the Swiss National Bank can never be traced to its original owners, but many relatives of Holocaust victims have strong claims on accounts held by Swiss banks. Just how much is a matter of conjecture, kept that way by the banks' reluctance to co-operate. Mr Bubis estimates that between $300m and $500m (pounds 192m and pounds 322m) was salted away at the onset of war by Jews. The banks have paid out some $36m (pounds 23m). Like the Nazi gold, the accounts have been locked away, their secrets sheltered by Swiss law. It was only in February that the banks admitted to holding some 39m Swiss francs (pounds 20m) in unclaimed accounts, and only in May did they finally agree to investigate. The books are slowly being turned over to a committee of Swiss experts and representatives of the World Jewish Congress, and the government has also appointed an ombudsman to mediate between the banks and individual claimants.

The ombudsman, Hans-Peter Haeri, believes there are treasures to be unearthed, but fears many relatives of Holocaust victims will be disappointed. "In most cases, the claims are based more on hope than substance," he says. This tangled tale may not have a happy ending for everybody, but at least they will now learn the truth.